Oil prices gave up their early gains on Monday after Iran's Foreign Ministry said negotiations with the United States could resume if they are based on national interests, a statement investors interpreted as a sign that diplomatic efforts may be revived.

Crude prices had earlier climbed to their highest levels in more than a month amid concerns that oil shipments through the Strait of Hormuz would remain disrupted.

Brent crude futures fell 16 cents, or 0.18%, to $87.94 a barrel by 09:22 GMT after earlier touching $91.42, their highest level since June 11.

US West Texas Intermediate crude futures declined 68 cents, or 0.82%, to $81.81 a barrel after reaching $85.39, their highest level since June 12.

Diplomatic signals from Tehran weigh on prices

Iranian Foreign Ministry spokesman Esmaeil Baghaei said mediators had delivered new messages to Tehran in recent days but did not disclose the nature of the proposals.

Giovanni Staunovo, commodities analyst at UBS, said the comments indicating that Iran had received fresh proposals from mediators prompted oil prices to surrender all of their early gains, even as shipping activity through the Strait of Hormuz remained subdued.

Slowing tanker traffic keeps supply concerns alive

Oil prices had extended last week's sharp gains at the start of Monday's session as the escalating confrontation between the United States and Iran continued to disrupt oil shipments through the Strait of Hormuz.

The crisis intensified over the weekend after the United States carried out a ninth consecutive night of strikes against Iran, while Kuwait and Bahrain, both US allies, reported fresh Iranian attacks.

Iran's Revolutionary Guard said on Monday that two oil tankers had broken down following explosions while attempting to transit what it described as the "unsafe southern route" through the Strait of Hormuz, claiming the US military had encouraged the vessels to use that passage.

Reuters said it was unable to independently verify the claims.

ANZ analysts said in a note that the supply disruption narrative had become even more concerning, with the expected recovery in shipping traffic effectively stalling as the number of vessels transiting the Strait of Hormuz fell into single digits.

LSEG data showed that only four ships passed through the strait on Sunday, compared with eight the previous day.

The data also showed that three refined product tankers and one very large crude carrier (VLCC) entered the strait since Friday to load oil cargoes.

In a separate development, the UK Maritime Trade Operations (UKMTO) said early on Monday that a vessel had caught fire northwest of Khasab, Oman.

Shipping data also showed that Gulf producers increased crude oil and condensate exports during the first half of July to their highest levels since before the outbreak of the Iran-US conflict in late February, although oil flows through the Strait of Hormuz have begun to slow as fighting intensified.

The collapse of the ceasefire between the United States and Iran has renewed concerns over the security of energy supplies passing through the strait, which handled around 20% of global oil supplies before the conflict erupted.

Iran has also continued pressing Yemen's Houthis to shut down the Red Sea oil shipping route if the United States targets Iran's electricity infrastructure.

The US dollar traded little changed on Monday as investors remained cautious amid uncertainty surrounding the evolving conflict in the Middle East, while sterling advanced as Andy Burnham prepared to succeed Keir Starmer as the United Kingdom's prime minister.

The dollar index, which measures the US currency against a basket of six major peers, slipped 0.1% to 100.72.

Markets remained focused on the ongoing exchange of military strikes between the United States and Iran following the collapse of a temporary ceasefire reached last month. The renewed conflict has intensified tensions over control of the Strait of Hormuz, disrupting energy supplies and fueling concerns over higher global inflation.

Nick Rees, Head of Macro Research at Monex Europe, said markets appeared to have become more comfortable with the range of risks they needed to price in.

"Unless something unexpected catches investors off guard, we are unlikely to see major volatility driven by the Middle East," Rees said.

"It will remain a source of concern and keep markets cautious, but we are probably returning to the environment we saw in May, when volatility gradually eased because there was no clear conviction about the market's next direction."

Brent crude futures were little changed at $88.16 a barrel after climbing above $90 earlier in the session.

Focus shifts to Britain's next finance minister

The euro was steady at $1.1441, while sterling rose 0.13% to $1.3470 as Andy Burnham moved closer to taking office as Britain's next prime minister.

Investors are paying close attention to Burnham's choice of finance minister, given the challenging fiscal position facing the UK.

British assets received support last week after reports suggested the role could go to Shabana Mahmood, who is viewed as a centrist, rather than a candidate with a more left-leaning policy agenda.

Chris Turner, Global Head of Markets at ING, said in a note that while sterling could continue to benefit from early optimism surrounding the new government, the UK's tight fiscal position means the administration may ultimately have to raise taxes if it intends to improve public services such as social care.

In other currency markets, the US dollar fell 0.17% against the offshore Chinese yuan to 6.7663 after the People's Bank of China left its benchmark lending rates unchanged for a 14th consecutive month, in line with market expectations.

Against the Japanese yen, the dollar was little changed at ¥162.34 as trading volumes remained subdued due to the Marine Day holiday in Japan.

Markets expect Fed to keep rates unchanged

Markets continue to expect the Federal Reserve to leave interest rates unchanged at its next meeting on July 29.

Fed funds futures currently imply an 85.6% probability that rates will remain on hold, up from 61.5% a month ago, according to the CME FedWatch Tool.

Meanwhile, Cleveland Federal Reserve President Beth Hammack joined a growing number of policymakers on Friday arguing that interest rates may need to rise further to contain persistent inflation.

Her comments set the stage for what could be a closely watched policy debate at the Fed's upcoming meeting, with the possibility of differing views emerging during Kevin Warsh's second meeting as Federal Reserve Chair.

Gold prices declined in European trading on Monday, resuming losses after Friday's rebound and moving back toward a two-week low as a stronger US dollar and rising global oil prices pressured the precious metal amid escalating military strikes between the United States and Iran.

As the conflict intensified, Brent crude climbed above $90 a barrel, fueling concerns over inflation after several Federal Reserve policymakers signaled that further interest rate hikes may be needed to contain price pressures.

The Price

• Spot gold fell 0.9% to $3,982.77 an ounce after opening at $4,017.45 and reaching an intraday high of $4,030.85.

• Gold settled more than 1% higher on Friday after earlier touching a two-week low of $3,959.72 an ounce.

• The precious metal lost 2.5% last week, posting its second consecutive weekly decline as military tensions between the United States and Iran escalated.

US dollar

The dollar index rose around 0.2% on Monday, extending gains for a third straight session and reflecting continued strength in the US currency against a basket of global currencies.

A stronger US dollar makes dollar-denominated gold more expensive for holders of other currencies, reducing its appeal.

Investors continue to favor the dollar as a safe-haven asset as military strikes between the United States and Iran intensify and shipping traffic through the Strait of Hormuz declines.

Global oil prices

Oil prices climbed around 3% on Monday, extending gains for a second consecutive session and reaching their highest level in six weeks as Middle East tensions intensified and Iran threatened to halt all traffic through the Strait of Hormuz.

Higher oil prices are renewing concerns over accelerating inflation, potentially prompting central banks to raise interest rates in the near term.

Latest developments in the Iran conflict

• The United States launched a fresh wave of airstrikes against targets inside Iran for a ninth consecutive day.

• The US strikes targeted military sites linked to Iran's missile and defence capabilities in an effort to weaken Tehran's ability to control the Strait of Hormuz.

• Iran's Revolutionary Guard launched coordinated retaliatory attacks using ballistic missiles and drones against military bases hosting US forces across the region.

• Iran said that not "a single drop" of oil or gas would pass through the Strait of Hormuz if US military operations continued, escalating threats surrounding one of the world's most important energy routes.

• Shipping traffic through the Strait of Hormuz declined sharply as security risks, inspections, and reciprocal attacks continued.

• The US Navy said it had intercepted and rerouted six commercial vessels and disabled a seventh as part of efforts to enforce a strict naval blockade on Iranian ports and isolate the country's coastline.

US interest rates

• Cleveland Federal Reserve President Beth Hammack joined a growing number of policymakers arguing that higher interest rates may be necessary to bring persistent inflation under control.

• According to the CME FedWatch Tool, markets currently price an 86% probability that the Federal Reserve will leave interest rates unchanged at its July meeting, with a 14% chance of a 25-basis-point rate hike.

• For the December meeting, markets assign a 20% probability of rates remaining unchanged and an 80% chance of a 25-basis-point increase.

• Investors are closely watching upcoming US economic data to reassess those expectations.

Gold outlook

Kelvin Wong, Senior Market Analyst for Asia Pacific at OANDA, said military developments over the weekend had increased the risk of the conflict escalating into a broader confrontation between the United States and Iran, potentially creating further headwinds for gold.

"If current stagflation concerns become more deeply embedded in markets, the opportunity cost of holding the precious metal will rise," Wong said.

Over the longer term, Wong said he remains cautious on gold and is watching the key support level at $3,886. A break below that level could trigger a further decline toward $3,500 an ounce.

SPDR Gold Trust

Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell by 2.86 metric tons on Friday to 999.02 metric tons, the lowest level since September 25, 2025.

The euro extended its decline against the US dollar in European trading on Monday, falling for a third consecutive session as demand for the greenback remained strong amid mounting concerns over the escalating conflict between the United States and Iran.

Rising global oil prices at the start of the week renewed inflationary pressures on European Central Bank policymakers, raising concerns that inflation across the eurozone could accelerate once again.

The European Central Bank is scheduled to meet on Wednesday and Thursday for its fifth monetary policy meeting of 2026, with markets overwhelmingly expecting interest rates to remain unchanged.

The Price

• The euro fell around 0.2% against the dollar to $1.1424 after opening at $1.1438 and reaching an intraday high of $1.1444.

• The euro ended Friday down less than 0.1% against the dollar, marking its second consecutive daily decline amid renewed concerns over the Iran conflict.

• The single currency gained 0.2% against the dollar last week, posting its second weekly advance in the past three weeks as it recovered from lower levels.

US dollar

The dollar index rose around 0.2% on Monday, extending gains for a third straight session and reflecting continued strength in the US currency against a basket of major and minor currencies.

Investors continue to favor the dollar as a safe-haven asset as military strikes between the United States and Iran intensify and shipping traffic through the Strait of Hormuz declines.

Global oil prices

Oil prices climbed around 3% on Monday, extending gains for a second consecutive session and reaching their highest level in six weeks amid escalating Middle East tensions and Iranian threats to halt all traffic through the Strait of Hormuz.

The rise in global oil prices is renewing concerns over accelerating inflation, potentially prompting central banks to raise interest rates in the near term, a sharp reversal from pre-war expectations that rates would remain unchanged or be cut for an extended period.

Latest developments in the Iran conflict

• The United States launched a fresh wave of airstrikes against targets inside Iran for a ninth consecutive day.

• The US strikes targeted military sites linked to Iran's missile and defence capabilities in an effort to weaken Tehran's ability to control the Strait of Hormuz.

• Iran's Revolutionary Guard launched coordinated retaliatory attacks using ballistic missiles and drones against military bases hosting US forces across the region.

• Iran said that not "a single drop" of oil or gas would pass through the Strait of Hormuz if US military operations continued, escalating threats surrounding one of the world's most important energy routes.

• Shipping traffic through the Strait of Hormuz declined sharply as security risks, inspections, and reciprocal attacks continued.

• The US Navy said it had intercepted and rerouted six commercial vessels and disabled a seventh as part of efforts to enforce a strict naval blockade on Iranian ports and isolate the country's coastline.

European interest rates

• Amid rising global oil prices, money markets increased the probability of the European Central Bank raising interest rates by 25 basis points in September to above 95%.

• Investors are awaiting additional eurozone data on inflation, unemployment, and wages to reassess those expectations.

• The European Central Bank will meet on Wednesday and Thursday this week for its fifth monetary policy meeting of 2026, with markets almost fully pricing in no change to interest rates.